Madden Gas Field and Lost Cabin Plant
The Madden Gas Field and Lost Cabin Gas Plant continues to be a dependable asset with positive returns for shareholders.
The Madden Gas Field and the Lost Cabin Gas Plant are in Natrona and Freemont counties, Wyoming approximately 95 kms (60 miles) from Elk’s Grieve CO2 enhanced oil recovery project. Elk owns a ~14% non-operating working interest in the Madden Gas Field and the Lost Cabin Gas Plant and associated gas gathering pipeline systems. The Madden Gas Field and the Lost Cabin Gas Plant is operated by Conoco Phillips (46%) and the balance of the unit and gas plant is owned by Moncrief Oil (30%) and various other private interest holders.
Discovered in 1968, the Madden Gas Field is a giant, conventional gas field located in the Wind River Basin and one of the largest gas fields in Wyoming. In energy terms, the State of Wyoming is the USA’s 4th largest natural gas producer and 8th largest crude oil producer. The field sits on the Madden Anticline and covers an area of over 200 sq. miles / 518 km2 / 128,000 acres. The field produces from multiple reservoir units ranging in depth from 5,000 to 25,000 feet (1500 meters to 7600 meters). With an estimated original gas in place of over 5.5 tcf, to date the Madden Gas Field has produced over 2.42 tcf of natural gas. According to the US Department of Energy’s, Energy Information Administration, the Madden Gas Field is the 33rd largest gas field in the US as ranked by Proved Reserves (Energy Information Administration’s US Crude Oil and Natural Gas Proved Reserves 2015 publication).
It has been a positive year for the Madden/Lost Cabin asset as it continues to deliver free cash flow and significant long-life, low-risk, high quality reserves and production from all three of our product sales streams, Natural Gas, Sulphur and CO2. Following our acquisition of 14% of the field and facilities in calendar year 2017, Elk has continued to strengthen its interactive relationship with operator ConocoPhillips. The beginning of financial year 2018 was marked by an increase in execution of approved Capital Projects, with a strong focus on an integrated approach to implementing operating cost reduction projects and scheduled processing plant turnarounds (TARs). The operator's strategy is to have a scheduled major TAR for each train every two years, with a small maintenance outage every other year. TARs are primarily driven by plant cleaning requirements, repairs and modifications with the goal always being to minimise duration and cost without compromising reliability.
During September 2017 as budgeted and planned the Train 1 gas processing plant was retired, having met its operationally economic end of life. At the same time a coordinated planned maintenance outage TAR of Train 2 was undertaken. This allowed the operator to decouple critical systems from Train 1 including the gas inlet and produced water and steam and condensate systems for Train 2. All equipment in good condition salvaged from Train 1 has been refurbished and stored on-site for future use in Train 2 which will further help in minimising long-term costs.
Because of the Train 1 retirement a number of safety, operational and expense improvements were immediately recognised by Train 2. These included the improved inlet circulation area around train 2 by utilising the Train 1 Inconel (an exotic heat and corrosive gas resistant alloy) aerial bays; re-utilising the Train 1 inlet separator to improve water separation and inlet circulation water quality and taking the opportunity of mothballing the Train 1 cooling water filter to have a redundant spare. The final costs for these safely executed major works were completed within approved AFE value. With the Train 1 retirement, Trains 2 and 3 are now running at their design capacity of 230 MMcf/day inlet and 150 MMcf/day sales. An additional 90 MMcf/day sweet gas processing capacity is available on the Madden Shallow Gas Field. The Lost Cabin Gas Plant is also the second-largest CO2 supplier for EOR in the Northern Rockies and is the starting point for Denbury's Greencore CO2 Receiving Facility and Pipeline which, after a two-year hiatus in October 2018 reinitiated CO2 (our full production stream) sales, supplying CO2 to Denbury's Wyoming and Montana CO2 EOR projects. Elk is now a CO2 supplier. In the second quarter the Sulphur prices increased, with most of our Sulphur transported by rail to supply the fertiliser market in Tampa Florida with the remainder transported to a local fertiliser plant located in south-western Wyoming. In the final quarter of the financial year 2018 a Train 3 TAR was safely completed over a six-day period.
Scheduled works in the Madden Shallow Gas Field during the year focused on the joint venture's ongoing commitment to the completion of planned economic uplift projects across the shallow wells to maintain production. These include minor well intervention projects to reduce frictional pressure losses in the wellbore by installing larger diameter tubing, undertaking water/acid wash well stimulations to mitigate scaling and continuing capillary string well programmes to mitigate against water loading in several wells. The joint venture also completed the scheduled abandonment of four long-term inactive shallow gas wells.
A pilot project to uplift the economic threshold of a well was completed during the year on the Maddison Deep Unit Well #8 by introducing rod pump artificial lift. As a result, the well transition from loading up with water to producing over 1 MMcf/day and 250+ BWPD for a gross cost of US$550,000 and adding 4 BCF Gross Reserves at $0.14/mcf, a strongly positive rate of return on investment. Based on this technical and commercial success additional wells have been indentified for recompletion with artificial lift during financial year 2019.